Geology

Actuarial science

Mathematics

Welfare

Statistics

Oceanography

Epistemology

Baseline (sea)

Philosophy

Psychology

Survey data collection

Economics

Deadweight loss

Microeconomics

School choice

Mechanism (biology)

Market economy

Social psychology

American Economic Review

This paper studies how welfare outcomes in centralized school choice depend on the assignment mechanism when participants are not fully informed. Using a survey of school choice participants in a strategic setting, we show that beliefs about admissions chances differ from rational expectations values and predict choice behavior. To quantify the welfare costs of belief errors, we estimate a model of school choice that incorporates subjective beliefs. We evaluate the equilibrium effects of switching to a strategy-proof deferred acceptance algorithm, and of improving households’ belief accuracy. We find that a switch to truthful reporting in the DA mechanism offers welfare improvements over the baseline given the belief errors we observe in the data, but that an analyst who assumed families had accurate beliefs would have reached the opposite conclusion. (JEL D83, H75, I21, I28)

Heterogeneous Beliefs and School Choice Mechanisms